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Roller Coaster Market Ride for the Week Ended March 20, 2009

March 21, 2009 — Sam H. Fawaz

It was a roller-coaster ride on the markets this week. First we were down, then we were up, then we were down again. As I wrote earlier this week, volatility is here for a while in the markets and, although we were up overall for the week, the fundamentals just aren’t there to push things in a consistent upward direction.

Congress’ distraction with the AIG bonus debacle meant that they were focusing on that instead of moving along the plan for dealing with the financial crisis. As a result, companies are equally distracted by concerns of whether accepting further government help means more meddling in their business affairs. So instead of lending money, for example, financial institutions become more concerned about paying back the government and operating independently, thereby negating the whole benefit of the bailout. In addition, much needed talented employees may consider joining firms with no government restrictions on compensation or potential exorbitant taxes on their bonuses. I’d be interested in your opinion here-please feel free to leave comments below.

I predict that we will continue to see some up days, some down days and generally sideways movement in the markets for some time. In the short-term, although we may see some net positive gains, there seems to be more risk than reward out there. Caution is still the approach we encourage.

My advice remains the same: consistent saving is your best defense against volatile markets. Keep contributing to that 401(k), IRA and your “dream” accounts. Pay down your debt as much as possible and make sure that you have a liquid emergency fund of at least 3-9 months of salary. And, as financial guru Dave Ramsey says, “refuse to participate in this recession” by enjoying every day, taking those vacations, and keeping in touch and sharing time with your loved ones.

Enjoy this first weekend of spring 2009. And remember, if the first robin of spring sees its shadow, you can expect at least twelve more weeks of crabgrass (at least according to “Magic” Matt Alan of Sirius-XM 70’s on 7.)

I’ve provided a weekly summary of the markets below:

Market Update For Week Ending 3/20/2009

Index

Close

Net Change

% Change

YTD

YTD %

DJIA

7,278.38

+54.40

0.75

-1,498.01

-17.07

NASDAQ

1,457.27

+25.77

1.80

-119.76

-7.59

S&P500

768.54

+11.99

1.58

-134.71

-14.91

Russell 2000

400.11

+7.02

1.79

-99.34

-19.89

International

1,054.60

+74.07

7.55

-182.82

-14.77

10-year bond

2.63%

-0.26%

+0.38%

30-year T-bond

3.65%

-0.02%

+0.96%

International index is MSCI EAFE index. Bond data reflect net change in yield, not price. Indices are unmanaged and you cannot directly invest in an index.

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. All material presented herein is believed to be reliable, but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions. Opinions expressed in this writing may change without prior notice.